Exactly a year ago, Facily, a Brazilian social commerce startup that allows people to buy products in groups, raised its Series A round. Venture capital’s alphabet soup continued at a strong pace for the startup throughout the year. As a result, in 2021, the number of orders delivered by the platform grew 46 times, to 7.1 million in October. This scalability potential and the ability to make a business idea from China work in a complex market like Brazil led investors to a (mega) extension of the startup’s latest round.
Facily announces this Thursday (23) additional funding of $135 million, which adds to the $250 million Series D reported in November, coming from the US-based VC firm Goodwater Capital and the South African tech group Prosus. The round was also followed by Rise Capital, Emerging Variant, Tru Arrow, among other funds.
“With this extension, which we are calling D-1 Series, we were valued at just over $1.1 billion. This does not have a value in itself, of corporate vanity, but it has a value linked with a dream of a startup that started in 2018, and it has already generated such an impact on the market and reached a critical mass”, says the CEO of Facily, Diego Dzodan, co-founder of the startup along with Luciano Freitas, ex-Airbnb and ex-Uber, and Vitor Zaninotto, ex-SAP, to LABS.
The executive, who before Facily was Facebook’s vice president for Latin America, believes that all this growth is closely linked to the highly connected behavior of Brazilians, who do not hesitate, for example, to share good offers with friends and family.
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What Facily does is use technology to ‘disintermediate’ value chains, targeting the base of the consumption pyramid. “If today you buy a banana in the supermarket for BRL 8.40, you will buy it in the app for BRL 1.99, with no shipping cost. It is the same banana”, exemplifies Dzodan, who reveals that the direct inspiration for Facily is Pinduoduo, a platform that connects farmers and consumers in China and temporarily surpassed giant Alibaba in the number of active users in March this year. Currently, the company has over 741 million active customers.
In the case of Facily, the app has already registered over 17.5 million downloads and has around 10 million active users – this last number has also impressed investors.
The component of Facily’s business model that could not be copied from China was logistics, something that is more expensive in Brazil and that proved to be a major obstacle for the startup. Throughout the year, Facily was the target of a large volume of complaints (150,000) at Procon-SP (an institution that gathers consumer complaints in the state of Sao Paulo), mainly due to delays in delivery or lack of refund.
In a meeting with the agency to remedy the complaints, the startup refunded consumers and committed to reduce complaints by 80% and invest BRL 250 million in service and logistics improvements.
“To be absolutely honest, sincere, we were clearly not ready to handle this growth and control 100% of the process (…) When capacity is not ready, delivery can suffer delays. Or, if the infrastructure is not ready, the order can be lost. These two areas, increasing deliveries and increasing controls, are our top priorities right now. Both the financial resources and the smart money tied to this capital [Delivery Hero and Rappi and Glovo‘s investor DX Ventures participated in the Series D round] are aimed at that,” says Dzonda to LABS.
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How Facilly’s app works
As a marketplace, Facily’s app allows consumers to join groups to purchase products and obtain discounts. Consumers can create their own groups or join others already in progress, with people interested in buying the same products.
In an effort to disintermediate entire chains, Facily does not charge consumer shipping or fixed commission from its sellers. The company has distribution centers in most of the cities where it operates, but not in all, and entrusts logistics stages to outsourced “experienced” operators.
The startup also set up a network of more than 12,000 pick-up points, made up, in its vast majority, of small businesses that earn 5% of the value of each item they deliver, up to a maximum of BRL 1 per item.
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“As the volume of orders grows, this commission becomes interesting. However, for many businesses, the greatest effect is cross-selling. For example, I visited a convenience store here in Sao Paulo a few weeks ago, which is next to a bus stop. People who usually take the bus at this stop end up choosing the store as a pick-up point, and the owner told me that 40% of those who pass by there end up buying something else from the store,” says Dzodan.
Sellers, in turn, receive more for Facily than they would receive in a traditional operation, even if prices are lower for the consumer and the startup charges an average commission of 15% per sale.
Consumers can pay for products via deposit or pay in cash upon receipt – which is also a key issue for a business that wants to reach the base of the pyramid, that is, lower-income people who do not have access to a credit card or are simply not used to shopping online. “We use some partners as a gateway for the transfers to our pick-up points. Today, our main partner is Starkbank [a digital bank based in Sao Paulo focused on enterprise accounts or startups that need to scale fast],” explains Dzodan.
The Brazilian cities where Facily operates are: Sao Paulo, Rio de Janeiro, Belo Horizonte, Curitiba, Fortaleza, Goiania, Brasilia, Recife, Porto Alegre and Salvador. In 2022, the startup wants to reach seven more cities and “close the year with a pilot project in a city in Mexico and another in a city in Colombia,” says Dzodan.